Yes, the first country we are going to look at is Romania. When you first think of Romania you probably think of vampires, cabbage and castles, but rental yields? In this country highlight I will discuss the current real estate market, economy and investment potential for short-term and long-term rentals. In addition, I will discuss some my thoughts and an example of the numbers for an Airbnb property.
Romanian Economy
The inflation rate in Q3 2023 was 8.5% yoy, and this trend is expected to continue over the next 12 months.
Romania recorded a 2.1% yoy GDP growth in Q3, with further robust GDP growth (3.6%) forecast for 2024.
Economic strengths:
1.      Skilled Workforce: Romania boasts a well-educated and skilled workforce, particularly in fields like IT, engineering, and medicine. The country produces a significant number of graduates each year, contributing to its human capital.
2.      Cost-Effective Labor: The relatively low labor costs in Romania attract foreign investors. Companies can benefit from cost savings while maintaining quality work.
3.      Strategic Location: Romania’s geographical position at the crossroads of Central and Eastern Europe provides access to major markets. It serves as a gateway for trade and investment between the EU and other regions.
4.      Tourism: Romania’s picturesque landscapes, historical sites, and cultural heritage attract tourists. The Transylvania region, Dracula’s Castle, and the Danube Delta are popular destinations.
5.      IT and Outsourcing: Romania has a thriving IT sector, with skilled programmers and software developers. Many multinational companies outsource IT services to Romanian firms.
6.      Manufacturing: The manufacturing sector, especially automotive and electronics, contributes to economic growth. Companies like Dacia (Renault) and Ford have production facilities in Romania.
7.      EU Membership: Since joining the European Union in 2007, Romania has benefited from EU funds, trade agreements, and access to a larger market.
8.      Infrastructure Development: Continues to invest in infrastructure, including highways, railways, and ports, enhancing connectivity and facilitate trade.
While Romania faces challenges, such as corruption, bureaucracy, and regional disparities, these strengths provide a foundation for future growth and development. I cant speak about the Romanian economy with out discussing the elephant in the room. Yes, the population is declining and last year I believe was the largest decline in a decade. The trend is concerning, however I think it is offset by many positive factors and if you are considering Airbnb the impact is minimal.
Population Trend
Tourists Per Year
In 2023, total tourists per year increased 10.5% yoy to 13.6M and total foreign tourists was 2M (+26.5% yoy). Total overnight stays were 29M (+9.8% yoy) with 4.5M of those being foreign tourists. The amount of tourists visiting the country continues to grow exponentially. The majority of tourists are European, but as the Romania becomes more popular that could change. Some popular tourist attractions are Bran castle, Peles Castle, Transylvania, Bucharest Palace of Parliament. Many Digital nomads have also decided to call Romania home given the fast internet and affordability.
I would be remiss if I did not discuss the low tax burden in Romania. Yes, taxes did increase this year, however rental income tax remains effectively 6%Â and business taxes remain very low relative to the west.
Romania Real EstateÂ
During 2022, Romania’s economy grew by about 5.8% yoy, according to the European Commission, following an expansion of 5.1%  in 2021 and a contraction of 3.7% in 2020.
Although the Romanian economy is expected to slow in the medium term, with a projected real GDP growth of just 1.8% 2023, the residential real estate market remains dynamic.
Romania’s housing market has experienced a cooling trend recently. Amidst slowing demand and residential construction activity, the average selling price of apartments in the country rose by 5.59% (yoy) to €1,682 per square meter (sq. m) in 2022. However, when adjusted for inflation, nationwide apartment prices actually dropped by 7.49% over the same period, marking the biggest decline since 2013.
Despite the declines, Romania's home prices have increased by 29.1% in the past 5 years according to eurostat. Demand for rentals remains high in Bucharest and other large cities as locals move to urban centers from rural areas. Another important point to know about Romania is its a owners market meaning house ownership is high compared to other European countries (95% in 2022).
Restrictions on Foreigners
Foreigners can buy apartments, but not land so purchases need to be done through a "dept de folotinta". The contract basically says the buyer owns the apartment, but not the physical land appropriated to the apartment. Most legal teams can assist with this, to avoid this problem a foreigner buyer can form an LLC and buy through the LLC. The regulations are pro-tenant but not burdensome.
Foreigners that are non-residents are also able to obtain financing with 25% down payment. The downside to getting a mortgage is non-residents can only get a variable rate loan so rates are high. Contact me for more information on mortgages, most of the process can be done remotely.
Investment Potential
Bucharest:
• Titan:
• Studio: €51,000 (8.24% yield)
• 1-Bedroom: €74,000 (7.30% yield)
• 2-Bedroom: €100,000 (6.36% yield)
• Berceni:
• Studio: €40,100 (8.98% yield)
• 1-Bedroom: €57,400 (8.36% yield)
• 2-Bedroom: €87,000 (6.21% yield)
Timisoara:
• Girocului:
• 1-Bedroom: €71,000 (5.92% yield)
• 2-Bedroom: €89,900 (5.34% yield)
• Aradului:
• 1-Bedroom: €85,750 (6.30% yield)
• 2-Bedroom: €98,250 (5.50% yield)
Cluj-Napoca:
• Mănăştur:
• Studio: €72,000 (5.83% yield)
• 1-Bedroom: €105,000 (5.26% yield)
• 2-Bedroom: €135,000 (4.89% yield)
• Gheorgheni:
• Studio: €89,500 (5.23% yield)
• 1-Bedroom: €124,200 (5.80% yield)
• 2-Bedroom: €160,000 (5.25% yield)
Craiova:
• Studio: €49,200 (6.95% yield)
• 1-Bedroom: €72,000 (5.83% yield)
• 2-Bedroom: €96,500 (5.10% yield)
Galati:
• Studio: €36,000 (8.00% yield)
• 1-Bedroom: €54,000 (7.78% yield)
• 2-Bedroom: €70,000 (6.86% yield)
Lași:
• Studio: €54,000 (7.11% yield)
• 1-Bedroom: €72,000 (6.67% yield)
• 2-Bedroom: €94,000 (6.38% yield)
Brasov:
• Studio: €53,000 (7.92% yield)
• 1-Bedroom: €86,500 (6.45% yield)
• 2-Bedroom: €121,500 (5.93% yield)
Constanța:
• Studio: €60,000 (8.00% yield)
• 1-Bedroom: €83,957 (9.29% yield)
• 2-Bedroom: €125,000 (7.68% yield)
These estimates are not set in stone and our based-on averages that were generated by AI. The yields are more of a starting place and you could see higher or lower yields. Each city is super unique and needs it’s own post. I would focus on Bucharest (the capital), Brasov, Timisoara, Cluj Napoca and Lasi. High yields don’t always equal good investments. Brasov is near the capital and a tourist attraction in its own right. The city is near the largest ski resort, has seen healthy appreciation and the opening of a new airport. Timisoara and Cluj Napoca are both major cities with airports, tourist attractions and sizeable local populations. Personally I wouldn’t buy in either city given the distance from the capital. Lasi I like a lot, because its basically a college town with many universities and students from all over Romania and Europe. The city could be great for renting to students. Demand is there and is not going anywhere and apartments a relatively cheap compared to other Romanian cities, the only downside is its far from the capital.
Short-term Rentals
Ok lets talk STRS. I like Airbnb in Romania. There is potential for higher yields and worse comes to worst you own a vacation home in a beautiful country.
According to AirDNA the highest performing markets are Bucharest and Brasov with scores of 99 and 83. AirDNA is a great source for understanding the fundamentals of any city in the world.
https://airdna.partnerlinks.io/mr2lywuoriao
Bucharest
·      $25-$100 Average Nightly Prices
·      $7.2K Average Annual Revenue
·      57% Occupancy with highs of 62% (Oct 23)
·      $177.8 REVPAR (+14%)
·      Common Features= Internet, Kitchen, Air Conditioning, Heating and Washer
·      5,473 Available Listings
·      10%-30% Property Management Fees
Brasov
·      $25-$100 Average Nightly Prices
·      $2.7K Average Annual Revenue
·      48% occupancy with highs of 69% (Aug 23)
·      $181.4 REVPAR (+9%)
·      Common Features= Internet, Kitchen, Air Conditioning, Heating and Washer
·      2,076 Available Listing
·      10%-30% Property Management Fees
Example of Short-term Rental
These are conservative assumptions for monthly numbers of an Airbnb in Bucharest. The $30k purchase price is on the lower end for Bucharest, but can still be found a little ways outside the city center. The rental tax rate is 10%, however after the standard deduction the effective rate is 6%. I also did not include any initial costs or mortgage payments. Some of the initial costs can include furniture, flights, legal fees and a down payment (mortgage route).
My Thoughts
In conclusion after spending many hours and days researching the Romanian real estate market I believe it is a great invest for your next Airbnb or long-term rental. The country’s tourist and tech industries continue to grow and prices are still lower than most countries in Europe. On the downside there is some bureaucratic noise, mortgages for non-resident are limited to variable rate, high inflation and declining population.
For Airbnb best to buy in Bucharest or Brasov and long-term rentals Lasi could be a great investment given the large student population and low prices. I want to dedicate a whole post to Lasi. Constanta and Galati also are good options based on yields for coastal properties although Bulgaria may have better yields. If you have any questions, comments or suggestions for the next country or topic I should do, feel free to reach out. I believe the next country highlight will be Serbia or Albania.
Getting Started
So numbers look promising, but where do I begin? If you are seriously considering Romania make a trip out there first. A trip will help you get a lay of the land and feel for the place. And on your leisure/business trip look at some apartments. The amazing thing about researching rentals abroad is now you have excuse to go on vacation.
Before you get out there make contact with a real estate firm. There are some great English speaking real estate firms. I can get you in contact with. In addition, getting a approved for mortgage can be a great first step, if you need financing. Thanks for your readership. Please share with your friends or anyone who is crazy enough to invest abroad.